CORONAVIRUS AND PROPERTY
By Neil Jenman
The most famous words about fear were probably spoken by Franklin Roosevelt during his 1932 inaugural address as US president. America was then in the grip of the worst economic depression in world history. Banks were closing, businesses were collapsing, and millions of people were losing their jobs. Fear ruled supreme. People were frightened to take any positive action in case they got a negative result.
It was fear that President Roosevelt (affectionately known as FDR) believed was making life worse. And so, in his inaugural address, he uttered the immortal words, “The only thing we have to fear is fear itself.” FDR believed if he could stem the tide of fear, he could turn the economy around – or, at the very least, stop it getting worse.
All this happened almost 90 years ago.
But today, in 2020, fear is back. With a vengeance. This time it’s not the economy scaring people, it’s a virus called coronavirus that, if worst reports are believed, threatens to kill millions of people worldwide. Perhaps tens or hundreds of millions of people. The worst doomsayers are saying it’s the end of humankind. Of course, on the other end are those who believe this fear “over a few germs that cause a bad cold” is an overblown ‘storm in a teacup’.
In Australia, the OECD tells us that we will be “one of the worst affected economies” from the coronavirus outbreak. At the same time, another report has a headline that screams “Houses to Hit Record Prices in Weeks”. This is despite the fact that, at a recent auction in Adelaide, two of the people who attended later tested positive to coronavirus which led to the closure of the real estate office.
With such varied opinions – and in the full knowledge that media often ‘hypes’ a story (to attract readers or viewers) – how are we to act if we are selling or buying in today’s real estate market? And what effect, if any, will the coronavirus have on the property market?
Already a well-known Melbourne agent claims the coronavirus has “smashed the top end” because, according to this agent “no one wants to put their home on the market if the Chinese are not buying”.
But the percentage of buyers from China has long been over-estimated in Australia, especially in the day-to-day housing market. Homes will continue to sell well without foreign buyers.
Sure, there may be some negative impact for investors who own apartments that are mainly rented to foreign students. They could be facing some challenges in finding suitable tenants. And yes, those developers who target buyers in Asia may find sales will dwindle. From a buyers’ perspective, however, this is a good thing as many of the apartments sold by developers to overseas buyers are wildly over-priced which means the buyers suffer huge losses when they try to re-sell their apartments.
Less buyers from overseas just means less buyers ripped off from overseas – and with local buyers already being ‘savvy’ to such dodgy developments, it’s quite possible some property developers could be facing challenges. But that won’t bother the ordinary home buyers.
In the general housing market, there probably won’t be an impact on prices – unless the coronavirus escalates severely. People still need to buy homes. Indeed, we Australians see our homes as our sanctuaries. A home is the one place most of us feel safe.
What will – or what should – change, however, are habits. Just as we are now taking sensible precautions in our daily lives, so must we take precautions in our real estate lives.
The one thing that must stop is hordes of strangers wandering through family homes. If you are selling your home, you should now insist that the agent only bring qualified buyers at a pre-determined time. No more free-for-all inspections. No way.
Let’s be clear, masses of ‘open inspections’ have never been the best way to “sell” homes. The reason for open inspections is not to find buyers as much as it is for the agent to find sellers; that’s right, other home-owners in the neighbourhood who are thinking of selling.
It’s amazing just how few sellers realise an obvious point: There are 10,080 minutes in a week. And yet, when you sell your home, your agent suggests you only have your home available for 30 minutes a week. Imagine if you owned a shop – or any business – and you only opened that shop for 30 minutes a week. It’s madness. Repeat: There are 10,080 minutes in a week; do not close your home for 10,050 minutes.
With the coronavirus scare, it’s your chance to tell your agent: “No open inspections. Bring only qualified and identified buyers at appointed times.”
This could be the chance for sellers to discover what the best agents have always known –inspections should always be flexible. Your home should only ever be inspected by genuine buyers and it should be available to inspect at any time that suits the buyers. One of the golden rules of selling is: Make it easy for buyers to buy.
Now, of course, if you are a buyer, you probably won’t want to inspect homes with hordes of other strangers – many of whom may be coughing and sneezing.
If you see a home you like, contact the agent and insist on a private viewing at a time to suit you. If the agent refuses, contact the owners directly (and yes, of course, that’s “legal”).
As to the big question of whether prices will drop because of the coronavirus and should you, therefore, delay your decision, the truthful answer is – no one knows. But the big point, if you are a home buyer looking for a family home: What does it matter?
If you are buying a home and you can afford the payments on the loan and you intend to live in that home for many years, how will it affect you if, after you buy, your home’s value drops? Other than psychologically, a price drop will make no difference to your enjoyment of your home.
Buyers often ask: When is the right time to buy? The answer to that question, if you are a family home buyer (not an investor) is this: The right time to buy is when you find a home you love that you can afford. Never mind what is happening in the rest of the world. Focus on what is happening in your world. As always, of course, in all aspects – financial and health – your priority should be to stay safe.
When it comes to fear of the coronavirus or the economy, remember the words of Rudyard Kipling who once said, “Of all the liars in the world, sometimes the worst are our own fears.”